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 Known as the DRD or Participation Exemption

 Subpart F and Section 956 are still in effect and Regulations address the coordination of the rulesSubpart F must be considered and included before Section 245A and 951ASection 956 may be eliminated or mitigated with 245A DRD

 U.S. C corporations that own 10% or more of a foreign corporation (other than a passive foreign investment company that is not also a CFC) shall be entitled to a 100% DRD for the foreign-source portion of dividends received from such corporation.

 Constructive dividends arising from a U.S. corporation’s sale or exchange of stock in a foreign subsidiary (held for more than one year) will be treated as a dividend for purposes of the 100% DRD.

 Any foreign taxes attributable to the income that gives rise to the dividend will not be eligible for the foreign tax credit or deduction. There is a holding period requirement that must be met for the dividend to be eligible for the deduction, where the foreign corporation stock must be held for more than 365 days during the 731-day period beginning 365 days before the ex-dividend date.

 All amounts that are eligible for the 100% DRD will reduce the U.S. corporation’s basis in the stock of the foreign corporation for purposes of determining loss on the eventual sale of such stock.